U.S. equity markets crashed, giving up earlier gains of more than 1%, after the Federal Reserve took less notice of market risks than investors had hoped.

Investors headed for the doors when Fed Chairman Jerome Powell insisted during his press conference that inflation was “symmetric” around 2%. He’s entitled to his opinion, but most of us read the numbers differently. The Fed seems indifferent to imploding inflation expectations, and that’s very bad for markets.

We expected the Fed to backpedal and give stocks a temporary boost. Expectations to that effect buoyed stocks Wednesday morning, but no longer. Notably, the small-cap Russell 2000 Index was the worst performer, down by more than 2%, for a total peak-to-trough decline of 23%. NASDAQ was down more than 2%, led down by semiconductor names.

The Federal Open Market Committee’s language was unchanged from its November statement, saying, “On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.”

The gauges of inflation expectations visible to the rest of us don’t look little changed. Investors expected a 2.2% inflation rate over the next 30 years in April; now they’re putting their money on a 1.9% rate.

As we noted earlier this week, oil explains a lot of the collapse of market inflation expectations (so-called breakeven inflation, or the difference between the yield on nominal and inflation-indexed Treasuries). But it doesn’t explain all of it, and that ought to worry the Fed. The fact that it doesn’t worry the Fed is a worry in itself.

The market expected a more dovish Fed, which is clear from the fact that the yield curve steepened before the Fed meeting, but flattened afterward. A flat yield curve means that the market thinks that the average interest rate over many years will be no higher than it is now.

The Fed thinks the economic data is good. Most of it is, but that’s the data that’s been sitting for weeks in the pipeline and reflects economic conditions of months ago. The forward-looking indicators are flashing yellow, and in some cases red.

It can’t be good when the most sensitive and forward-looking gauges of economic activity point downward.

FedEx knows as much as anyone about the condition of world trade, and its CEO, Frederick Smith, yesterday reported that things have taken a sudden turn for the worse during the past three months. Smith told investors: “When you have a change that comes on you as fast as this did, it’s hard to react to it. Our international business, especially in Europe, weakened significantly since we last talked with you.” Why is this happening? “Most of the issues that we are dealing with today are induced by bad political choices. I mean, making a bad decision about a new tax; creating [a] tremendously difficult situation with Brexit…. the mercantilism and state-owned enterprise initiatives in China; the tariffs that the United States put in unilaterally. So you just go down the list, and they’re all things that have created macroeconomic slowdown.”

There is nothing new in Chinese mercantilism, and Britain doesn’t really matter (nor for that matter does Italy). The shock to the system came from the threat of trade war. Surveys of expectations about exports and forward-looking diffusion surveys of the largest economies are looking funky.

Fed Chairman Jerome Powell at his press conference on December 19 sounded like he had wandered out of time capsule: growth is strong, unemployment is low, and inflation is stable, he said in his prepared remarks. Inflation, he allowed, ended 2018 a bit more subdued than expected. “The economy may not be as kind to our forecasts this year as it was last year,” he added, noting that the Fed would raise rates more slowly if growth was weaker than expected.